Preparing for the Spending Review: Concerns about welfare

With Government spending plans for 2015-16 due to be announced next month, NCVO has been looking at what the sector can expect.

Our latest Counting the Cuts report shows that further cuts are on the cards. Where these cuts will fall is the main topic of political debate. Will councils be expected to make further sizeable cuts? Will welfare budgets or un-ringfenced departments be squeezed further?

The Chancellor showed us his hand during the Budget earlier this year. He will be looking to find an additional £11.5bn savings in 2015/16. This will come from departmental budgets and could have a further impact on public services at local level, particularly as council budgets have already been hard hit.

But the Chancellor also made an announcement that could affect spending over the much longer term. He indicated that a new limit will placed on ‘annually managed expenditure’ – the greatest proportion of which is welfare expenditure:

“Ultimately as a country we will not be able to spend more on the services we all value, from our NHS to our armed forces, or invest in our infrastructure, unless we go on tackling the growth of spending of welfare budgets. The public spending framework introduced by the previous government divided government spending into two halves: fixed departmental budgets and what is called Annually Managed Expenditure. Except in practice it was annually unmanaged expenditure – and it includes almost the entire welfare budget as well as items like debt interest and payments to the EU….

We will now introduce a new limit on a significant proportion of Annually Managed Expenditure. It will be set out in a way that allows the automatic stabilisers to operate – but will bring real control to areas of public spending that had been out of control. We will set out how more detail on how this new spending limit will work at the Spending Round.”

This announcement has caused serious concern among many NCVO members, who are worried about the impact further welfare cuts would have on people’s lives.

NCVO has been investigating, but there is not much detail available at this stage. Treasury officials point to other countries, where a greater proportion of their government spending is fixed, and where different types of limits apply. Meanwhile, Treasury Minister David Gauke simply said ‘wait and see’ at a recent Budget seminar.

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Charlotte Ravenscroft was NCVO’s head of policy and public services. Charlotte’s wrote about funding, public service delivery, and strengthening the evidence base for voluntary action. She has also worked at the Big Lottery Fund and the Department for Education.